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LOS b: Determine the value at expiration, profit, maximum profit, maximum loss, breakeven underlying price at expiration, and general shape of the graph of a covered call strategy and a protective put strategy, and explain the risk management application of each strategy.
Q1. Given the payoff diagram shown below of an option combined with a long position in a stock, which of the following statements most accurately describes the profit or loss potential to the holder of the combined position?
A) The maximum loss on the long put is its cost.
B) The maximum profit on the long call is unlimited.
C) The maximum profit on the short put is $2.
Q2. An investor buys a 30 put on a share of stock for a premium of $7 and simultaneously buys a share of stock for $26. The breakeven price on the position and the maximum gain on the position are:
Breakeven price Maximum gain
A) $33 unlimited
B) $21 $11
C) $37 $11
Q3. An investor buys a share of stock at $33 and simultaneously writes a 35 call for a premium of $3. What is the maximum gain and loss?
Maximum Gain Maximum Loss
A) unlimited -$33
B) $2 -$35
C) $5 $30
Q4. The shape of a protective put payoff diagram is most similar to a:
A) short call.
B) covered call.
C) long call.
Q5. A covered call position is:
A) the simultaneous purchase of the call and the underlying asset.
B) the purchase of a share of stock with a simultaneous sale of a put on that stock.
C) the purchase of a share of stock with a simultaneous sale of a call on that stock.
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发表于 2009-3-2 12:33
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